Split Economies: The Future of Work and Employment

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  1. Avatar LeeEsq
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    People predicted in the end of work as the 18th century turned into the 19th and the 19th century became the 20th. In the end, enough work was found for the majority of people. As fewer farm laborers were needed, people became factory workers, miners, and domestic servants. Domestic servants provided the first employees of the new tourism and restaurant industry at the turn of the 20th century. When factory work declined, the ranks of white collar, pink collar, and service industries blossomed. It probably will not be pleasant but new work will emerge eventually based on historical precedent. There is a chance that we are entering into a truly new and revolutionary era when it comes to work though.Report

    • Avatar Morat20 in reply to LeeEsq
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      says:

      The problem with that concept is this: The jobs aren’t going away in favor of new jobs, so much as the jobs are just being done…automatically.

      If you’re a buggy maker and the automobile comes along, well — one can at least try to learn how to make automobiles. But what do you do, as the buggy maker, if people still want buggy’s but they’re being made my robots?

      Your job is still there. It’s just machines do it better. You can hope to at least make machines, but that’s a pyramid — you need relatively few people to make the machines.

      That’s the real issue — the demand for your job hasn’t been replaced. It’s still there. It’s just a person isn’t needed to fufill that demand. And the nice thing about automation is, well — once you’ve automated a process, the people who did that work can go automate a new one. For every hundred jobs being lost, you’re lucky if there’s one opening in the “make/program/service automation’ area.Report

  2. Avatar Dand
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    Look at this graph:

    http://2.bp.blogspot.com/–U9jzv7owX8/VPm4teUz3hI/AAAAAAAAiko/vbbzTdEm7HI/s1600/EmployPop2554Feb2015.PNG

    People keep talking about the “post work economy” but the percentage of the population working is higher than it was 50 years ago.

    And people who talk about the post work economy are also likely to argue that

    1) We should enact policies that enable encourage dual-income households
    2) We need to increase immigration because without it we’d have a labor shortage.Report

    • Avatar LeeEsq in reply to Dand
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      says:

      I don’t think this is an entirely on point response. Derek Thompson is talking about unemployment caused by radical advances in technology rather than social pressures designed to keep women at home. Its about the disappearance of the jobs that turned the working class into members of the middle class.Report

      • Avatar Dand in reply to LeeEsq
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        says:

        The two aren’t unrelated; 50 years 2 jobs supported 2 middle class families now those 2 jobs often support 1 upper middle class family. And if technology is in fact destroying middle class jobs why should government policy incentivize 2 income families?Report

  3. Avatar Burt Likko
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    says:

    I see a tension between two things noted in the OP. Compare:

    In 1964, the nation’s most valuable company, AT&T, was worth $267 billion in today’s dollars and employed 758,611 people. Today’s telecommunications giant, Google, is worth $370 billion but has only about 55,000 employees—less than a tenth the size of AT&T’s workforce in its heyday.

    with

    …big industries like law and finance might have trouble reducing hours based on pay-structure and culture. … there are a lot of workaholic managers who don’t know how to measure performance in anyway besides time spent at the office. We will need to find a way to measure dedication and performance besides hours at desk and force it strictly to get hours down.

    Which begs the question in my mind, “What is the purpose of a corporation?” If the purpose of a corporation is to maximize profits, then Google is just plain way better because of productivity increases, but a Biglaw firm must engineer itself to be deliberately inefficient. So that can’t be right, can it?

    Or maybe the purpose of a corporation is to maximize employment, both qualitatively and quantitatively, in which case we mourn the loss of AT&T, sneer at Google for its quantitative shortcomings, and sneer at Biglaw for its qualitative flaws. But this seems incomplete: while a “good jobs” model certainly attracts talent and creates tremendous capabilities, no one is interested in a corporation because of its awesome potential. It’s not just what a corporation can do, it’s what the corporation actually does.

    But, if the purpose of a corporation is to deliver value to customers, then inputs like labor are irrelevant at the first tier of priority and decision-making. Which means the Biglaw firm is indeed a dinosaur and should switch to a value-billing scheme, like some of its competitors are doing.Report

    • Avatar Saul Degraw in reply to Burt Likko
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      I don’t think a corporation has just one purpose. I never fully bought into the Maximizing shareholder value theory and think it has wrecked a lot of havoc on society including not having money for development and research because many companies pay most of their income into dividends. Or it has led to stock buybacks so companies don’t have to pay dividends.

      I don’t know if we are ever going to see the day of AT and T with their 800,000 employes again but there is a value in employment.

      The answer is probably a combination. Big Law firms need to find a way to earn money beyond the billable hour. Same with consulting companies and firms. We should probably talk about how to get rid of stuff like buying companies, removing all the assets and then leaving the shell remainder with nothing but debt and liability. The Financial Engineering that many finance firms does is also suspect. A tweet should not be able to have an avalanche effect on the stock market.Report

      • Avatar Oscar Gordon in reply to Saul Degraw
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        says:

        I never fully bought into the Maximizing shareholder value theory and think it has wrecked a lot of havoc on society

        Can disagree too much with this…Report

        • Avatar Saul Degraw in reply to Oscar Gordon
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          says:

          @oscar-gordon

          Do you mean can’t?Report

        • Avatar Morat20 in reply to Oscar Gordon
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          says:

          Charles Stross, in a throwaway paragraph in Rule 32 I often think of these days:

          “The European Parliament responded by focusing on corporate governance. If corporations wanted to be legal citizens they could damned well shoulder the responsibilities of good citizenship as well as the benefits. Social as well as financial audits were the order of the day. Directives outlining standards for corporate citizenship were drafted and a lucrative niche for a new generation of management consultants emerged – those who could look at an organization and sound a warning if its structure rewarded pathological behaviour.” Report

      • Avatar LeeEsq in reply to Saul Degraw
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        says:

        @saul-degraw , @burt-likko the technical purpose of a corporation is not to maximize shareholder value or maximize employment. The technical purpose is to encourage investment by ensuring that investors are only liable to the extent of their investments rather than personally liable if things go wrong. Whether the shareholders do well or the corporation employs a lot of people is irrelevant to this purpose.Report

      • Avatar James K in reply to Saul Degraw
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        says:

        @saul-degraw

        It’s not that straightforward. Stocks are typically divided into “growth” and “value” stocks. Growth Stocks are not expected to cough up much (if any) in dividends, so long as they keep growing rapidly (these tend to be companies in dynamic, rapidly-growing industries). By contrast, value stocks belong to industries where there are’t a lot of lucrative investment opportunities so they are expected to be a ready source of dividend revenue.Report

    • Avatar Stillwater in reply to Burt Likko
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      says:

      Burt,

      What is Value Billing? Is it similar to a hard bid for services rendered?Report

      • Avatar Burt Likko in reply to Stillwater
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        says:

        I believe that’s correct, if I’m understanding ‘hard bid for services rendered’ to be what in other fields is called a ‘flat fee.’ Contrast that with what a contractor calls “T&M,” which is the default for how lawyers work.Report

    • Avatar Saul Degraw in reply to Burt Likko
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      says:

      @burt-likko

      I also don’t know if you can compare corporations and law firms because law firms are generally partnerships and profit per a partner might justify the billable hour more.Report

      • Avatar Burt Likko in reply to Saul Degraw
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        says:

        Well, the biggest firms all seem to be professional corporations these days; when I do my opposition research on the lawyers from Arrogant, Expensive, & Condescending I see named on the other side’s case captions, I’ve been noticing that it’s “Arrogant, Expensive, & Condescending, P.C.” more often than it’s “Arrogant, Expensive, & Condescending, LLP,” and the lawyers are listed as “Shareholders” rather than “Partners.”

        Perhaps the difference is technical; I only have a foggy notion of how the sliding scales for equity compensation work in huge firms like that. To be sure, some lawyers’ time is more valuable than others, and perhaps different billing rates reflect that and perhaps some clients do like it that way.Report

        • Avatar nevermoor in reply to Burt Likko
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          says:

          The problem is I’ve never seen an alternate proposal that makes any sense at the outset of an engagement in defense-side litigation. In other areas you do see a lot more flexibility (plaintiff-side lawyers are very often on contingency, transactional lawyers can often agree to fixed or hard-capped bills).

          But here’s the problem: Smart Business Person calls me because they have been sued and sends me the complaint. The complaint makes SBP look like an absolute asshole who is days away from parting with the net worth of several mid-size countries. SBP tells me the complaint isn’t true (much unlike every similarly-situated person). SBP then asks me what it costs to defend him. Now, I’ve done a number of cases, so I don’t have to just say “somewhere south of nine-figures, give or take” but I also have absolutely no idea how difficult the facts will prove to be and only have the vaguest sense of whether discovery will run 1, 2, or 5 years. But there’s no way I can just give a firm bid the way a contractor can (and their bids are “firm” only in the loosest sense). There’s also no incentive structure that makes sense, since SBP doesn’t think the claim has value so winning isn’t some stunning outcome worthy of a massive reward.

          The billable hour may be kind of lame, but what else can I tell SBP?Report

          • Avatar Saul Degraw in reply to nevermoor
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            says:

            @nevermoor

            IIRC the Vioxx defense was done at a flat fee though this might be an exception that proves the rule.

            Most legal work was done on a flat fee basis until the 1950s. The Billable Hour was created in the 1950s because lawyers felt like they were losing out in income compared to other professionals. One of my drama professors in college was the son of a lawyer and the brother in law of a lawyer. He said that his dad was aghast when the brother in law wanted to charge clients by the hour.Report

          • Avatar Burt Likko in reply to nevermoor
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            says:

            The lawyer can offer a menu. For instance, you might say:

            An answer to the complaint will cost you $2,000. On the other hand, a Rule 12(b) motion to dismiss will cost you $10,000, and we estimate it has a 15% of making the whole case go away, one way or the other. If it doesn’t, you have to answer anyway.
            Paper discovery costs you $10,000 for Kia-level investigation, $20,000 for Toyota-level investigation, and $30,000 for Lexus-level investigation. We think you need at least a Toyota here. Responding to paper discovery will cost you $20,000. Motion practice related to discovery costs you $15,000 per motion; we will endeavor to avoid the need to deal with motions.
            From there, each deposition costs you $30,000 in preparation time and out-of-pocket costs. We recommend that you depose persons X, Y, and Z. The depositions of persons A, B, and C on our side are likely to happen.
            Informal settlement discussions will be ongoing and included in the fee. A one-day mediation will be $10,000.
            We advise preparing a motion for summary judgment should the case reach that point. That’ll cost you $50,000, and we can’t give you odds on that now, because we haven’t done the discovery yet.
            If we go to trial, that’s going to cost you $100,000.
            We’ll quote you a fee on appeal if that becomes necessary. Same thing if there are any other unusual events that happen along the way.
            From there, it’s up to you to consider the stakes of the case, the chances of success for each maneuver. Seems to me the ideal strategy is [X]. Let’s talk about whether that’s the right way for you to go given the stakes and the budget you’re looking at.

            Now, maybe I’d refine those numbers a bit because I’m just spitballing here to give you an idea of what that might look like in a civil case like a business dispute. Taken to an even greater extreme, criminal defense cases are very typically done for a single, agreed-upon fee, which is paid in full entirely in advance regardless of how much investigation, motion practice, or trial work is needed.Report

            • Avatar nevermoor in reply to Burt Likko
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              says:

              Sure, there’s the possibility of budgeting (which is common practice), but doing it your way forces me to bear the risk of (1) aggressive litigation on the other side; (2) complicated facts not immediately apparent; etc without any upside. So say the motion to dismiss ends up being quite complicated because we have an arcane judicial notice fight. But we win. Now I’ve done $25k in work but only get $12k. It just isn’t an industry that allows for hard caps except in the most routine cases.

              And you can’t be fully a la carte because taking the case (basically) commits you to finishing it. You don’t want to withdraw because a client decides not to pay for some down-the-line expense.

              I can’t speak to criminal, but I suspect the payment risks are a lot different so upfront money is the only viable option.Report

              • Avatar Burt Likko in reply to nevermoor
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                says:

                You have to bear the risk of aggressive litigation on the other side no matter what my fee structure is. You have to bear the risks of complicated facts not immediately apparent no matter what my fee structure is. Those are risks inherent in the nature of litigation, not inherent in the nature of engaging a lawyer.

                The engagement of a lawyer does, however, inherently involve making an economic efficiency calculus.

                And I have withdrawn from cases because my client hasn’t been paying his bills. It isn’t fun, and I prefer to work with the client to resolve payment issues, but yes, I do that.Report

              • Avatar nevermoor in reply to Burt Likko
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                says:

                But if the client is bearing those risks you aren’t really proposing a hard cap. You’re proposing a budget which is (almost certainly) anchored in a calculation of your hourly rate x number of hours it usually takes. So I’m not sure we get anything but a buzzword out of “value billing.”

                True value billing is more like a contingency fee where you can spend 10 hours or 1,000 hours on your MSJ but either way you only get X% of the recovery. Lawyers can, and do, make that model work but the client incentive just isn’t there on the defense side.Report

            • Avatar LeeEsq in reply to Burt Likko
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              says:

              The menu system or the flat fee tends how it things work in immigration law billing unless you as an alien get lucky and a legal aid organization or corporate firm doing pro bono work decides to do your case. Billable hours does not work in immigration law because once you get these things mastered, filling out the forms doesn’t take that long and interviews or hearings tend to be half an hour to two or three hours max.Report

            • Avatar Michael Cain in reply to Burt Likko
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              says:

              Granted there’s been inflation since what I’m about to describe happened, so I don’t know if it’s still applicable, but still… I asked someone high up in the legal dept of the giant corporation i worked for why they had so many lawyers on staff. “Because,” they told me, “for the guaranteed salaries and benefits they’ll take, we can afford to pay these guys to sit on their thumbs two years out of three compared to what outside counsel costs for routine sh*t.”

              The legal system is opaque to almost everyone not directly involved. No one on the outside has a clue about what a fair hourly rate is, or how many hours routine stuff takes. The perception is that lawyers are gouging everyone.

              I have no clue how to fix this.Report

  4. Avatar Kazzy
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    says:

    Comparing AT&T to Google is comparing apples to oranges. AT&T had a massive network of wires and poles and other infrastructure that needed maintenance. Google doesn’t. Furthermore, you are comparing the most valuable corporation at the time with the most valuable telecom/tech corporation of this time. Why? Compare AT&T to Walmart.Report

    • Avatar James K in reply to Kazzy
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      says:

      @kazzy

      in addition to the points you and @aaron-david make, I would note that business in general may have become more capital-intensive since the 1960s.As such, CPI is the wrong series to use to adjust AT&T’s market capitalisation – I would suggest using the NYSE’s total market capitalisation instead.Report

  5. Avatar Oscar Gordon
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    says:

    Why can’t employers hire two people to work 35-40 hours a week instead of hiring one person to work 70-80 hours a week?

    Because we’ve structured it so that having 2 people on staff is more expensive that having one person work twice as hard. It’s not just double pay, it’s also benefits paid out, and taxes paid out, etc. If I can get Joe to work 70-80 hours a week for a 40% bump in pay, where is the value in hiring another Joe? Sure, I run the risk of Joe burning out, or of being in a lurch if Joe is sick or on vacation, but how much does that risk cost? Is it enough to justify paying for two Joe’s at 40 hour salaries?

    We got some New Deal baggage we need to restructure for the modern economy. Employers need an incentive to hire more people.Report

    • Avatar Kazzy in reply to Oscar Gordon
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      says:

      Plus this doesn’t work in all industries. Mine, for instance.

      Edited to add: Because of the nature of the work. Even if we resolve Oscar’s spot-on objections, certain fields can’t simply divide and conquer.Report

    • Avatar Mike Dwyer in reply to Oscar Gordon
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      says:

      @oscar-gordon beat me to this. Permanent workers are a burden to your payroll so you don’t hire them until you really have no choice. I’m in the middle of a huge project right now, working 60+hours per week. In a few months when it calms down I might only work 40 hours per week for the next 6 months. If we had hired someone to take part of my workload they wouldn’t have any work down the road.Report

      • Avatar Kazzy in reply to Mike Dwyer
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        says:

        Assuming @mike-dwyer is in the position to hire (or at least take part in the decision as to whether or not to hire)… if his perception of “workers” as “burdensome” due to the financial costs associated with individual positions is more or less representative of folks in position to hire, I think that tells us a lot about what needs to be done.

        The very small glimpse I had behind that curtain showed me that in order to create a position that paid $X, the company had to allocate $X+Y, with Y potentially surpassing 25% of X… especially for low wage positions (certain parts of Y are fixed e.g., you are going to pay potentially $10K/year for your employee’s salary whether he makes $30K or or $300K).

        The problem is most folks have no idea that this is how the system works.

        Now we can’t — or wouldn’t want to eliminate all that goes into Y — but it does need to be addressed if we want to increase the number of jobs.Report

        • Avatar Mike Dwyer in reply to Kazzy
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          says:

          Just to add a bit: We love to hire new people. It means we’re growing as a company and that is always a good thing. The project I am working on has hired quite a few new employees in New Hampshire, so that’s a good thing. But we also use temp employees in areas of the operation that require a lower skillset and we can quickly retrain replacements if need be. This limits our payroll exposure and keeps us more nimble. And the temps are great because we can ‘kick the tires’ on them and move to hire the better ones as more permanent positions become available. It’s almost like a paid internship in some ways.Report

    • Avatar Saul Degraw in reply to Oscar Gordon
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      says:

      @oscar-gordon

      I don’t disagree and I don’t think many liberals do either. The issue is that there seems to be an ideological split about what should be done. Almost everyone thinks that tying employment to health insurance and pensions is nuts. The split is in the solution:

      1. You have liberals arguing that the best way to free up employers from these obligations is through a robust welfare state with single-payer insurance and pensions done via the government like a Social Security plus plan.

      2. You have a lot of conservatives who still want to dismantle the entirety of the New Deal and abhor the idea of socialized medicine despite the fact that almost every other Western nation loves their socialized medicine.

      I am not sure how to solve this issue.Report

      • Avatar Oscar Gordon in reply to Saul Degraw
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        says:

        Dealing with health insurance would help, but I imagine paying out other benefits & taxes also factors into it.

        Things like this, however, will probably not help.

        In short, however, if you want to increase employment, you have to find a way to incentivize employers to hire more.Report

      • Avatar Michael Cain in reply to Saul Degraw
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        says:

        When I put my systems analyst hat on, there’s a fundamental conflict. What we’re telling the top management of businesses is “I can reduce the per-employee costs to the business by making them social costs: single-payer health insurance, generous public pensions, unemployment insurance paid for out of the General Fund, etc. The down side is that the consumption tax on the second million-dollar yacht that you personally want to buy this year is going to be staggering…”Report

  6. Avatar North
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    says:

    The two articles have some obvious blind spots. They hand wave away GBI with the standard nostrums, mainly that it’s politically difficult right now and that people who’re unemployed aren’t generally happy and productive with all their free time. This of course is so idiotic it’s almost risible. In order:

    -Of course it’s politically difficult right now, that’s because we’re not economically anywhere near a post work society. For fish’s sake unemployment is in single digits. Post work it ain’t and without post work unemployment levels it’s hard to get much political oomph behind post work policies. This is not political rocket science here.
    -The idea that a person making a GBI in perpetuity would behave the same as a person who’s lost their job and is on temporary welfare or is simply on their own is insane. The latter are depressed, surrounded by a norm of fulltime work and are facing an uncertain and anxious future. The former would be facing none of these. Pure leisure would undoubtedly increase but it’s also highly likely that many people on GBI would take up other kinds of labor that is useful but not so useful now days that people will forge a paying job or pay a person to do. We’d probably see an explosion of the arts, networks of parenting support and neighborhoods burgeoning with gardens and active communities to say nothing of all the experimenting and entrepreneurship that people would feel safe enough to try.

    I mean I get that it’s mainstream media and therefore even on the Atlantic needs a certain percentage of “sky is falling clickbait” tone to it but it’s still dumb.Report

  7. Avatar Mo
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    says:

    Thompson notes that economists often mention that new technologies might create better jobs but he dourly notes that most American workers still have jobs that existed a century ago.

    Define existed. Financial analysis and accounting of some sort existed a year ago, but without the computer spreadsheet, was a grueling, time consuming effort. Things like doing sensitivity analysis or scenario testing was non-existent.Report

  8. Avatar aaron david
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    says:

    ” In 1964, the nation’s most valuable company, AT&T, was worth $267 billion in today’s dollars and employed 758,611 people. Today’s telecommunications giant, Google, is worth $370 billion but has only about 55,000 employees—less than a tenth the size of AT&T’s workforce in its heyday.”

    In ’64 AT&T was a monopoly, the only provider of telecommunications. Today, the US telecom industry employs 868 thousand people and $406 billion total worth. Google is a totally different industry, the search engine and tech industry. @kazzy is correct up above in that comparing the two makes no sense.Report

  9. Avatar Damon
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    says:

    “Why can’t employers hire two people to work 35-40 hours a week instead of hiring one person to work 70-80 hours a week?”

    Because it costs more!

    2 people, two benefit program expenses, 401k, etc. Really? That was hard?Report

    • Avatar Morat20 in reply to Damon
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      says:

      Yet, interestingly enough, you’ll actually come out ahead in work done.

      Productivity drops off a cliff after a certain amount of time (both per week and per day, in fact). You work 80 hours a week? If you get 25% as much done that second 40 hours as the first, you’ll be one of the very, very, very rare outliers. And generally you have to PAY that guy for that 40 hours (or do comp time or something) – -so you’re only saving on benefits.

      But despite the fact that two people at 40 hours a week will cost you the benefits for the second person, they’ll get far more done. But it looks more expensive on paper.

      Which is why businesses insist on crunch time and overloading workers, because it looks cheaper on the simplest bottom line projection you can make — which is what your superiors want. They SEE your employee weekly costs. They don’t see the losses from inefficient work by employees.

      It’s the same sort of own-goal as Boeing outsouring it’s entire airplane design. It saved money on paper, but the end result was a net loss. It’d have been cheaper, faster, and better to have simply…not fired their entire engineering division and outsourced design and construction overseas to lowest bidders.

      And that ain’t hindsight. Everyone who wasn’t working for Boeing management saw THAT train barreling down the tracks.Report

      • Avatar Mike Schilling in reply to Morat20
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        says:

        The Mythical Man-Month was written forty years ago, but an awful lot of people never got the word.Report

      • Avatar Oscar Gordon in reply to Morat20
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        says:

        Morat20: And that ain’t hindsight. Everyone who wasn’t working for Boeing management saw THAT train barreling down the tracks.

        Ain’t that the truth! Oh the kvetching about that when I was working there…Report

      • Avatar Damon in reply to Morat20
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        says:

        Oh, I don’t disagree at ALL. Simply stating the “calculation”. I’m good for about 50 to 60 hours of work before I really start crapping out but my productivity starts taking a real dive and I take a lot more “breaks”.

        And really, it’s “expected” that you’re going to kick in 5-10 hours of OT (unpaid) a week. I happen to have one of those jobs where volume of work is variable, so sometimes there is not much to do, but other times, the requirement is “meet the deadlines, all of them”.Report

  10. Avatar zic
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    says:

    I think declining birth rates are going to solve a lot of these problems.

    Right now, we still have the bulge cohort of baby boomers in the workforce.Report

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